GBP: Risk-reward favours not chasing Brexit sentiment driven moves lower - ING

The EU’s draft ‘Withdrawal Agreement’ knocked the pound sharply lower – as investors reassessed the probability of a near-term Brexit transition deal being agreed, notes Viraj Patel, Research Analyst at ING.

Key Quotes

“Yet, we believe GBP’s decline this week is more Brexit sentiment driven – rather than a reassessment of UK economic fundamentals – and point to the 2-3 year part of the UK rate curve staying fairly resilient. History suggests that under such episodes, GBP has the propensity to correct more sharply if we get any good news. We’ll need a catalyst, but risk-reward favours not chasing Brexit sentiment driven moves lower in GBP. Look for consolidation in GBP ahead of PM May’s speech (Friday).”